The view from Studio Bility designer Gudrún Lilja Gunnlaugsdóttir’s home just outside Reykjavík would be bucolic were it not for the threat of severe weather. In the former auto repair garage that she and graphic designer husband Jon Ásgeir Hreinsson are renovating, expansive windows look out on a lighthouse at the end of a long jetty. At midnight on the night after Midsummer’s Eve, the sun hasn’t set. We have a clear view of the sky as it grows moody, stooping low and gray, reminding us that summer could disappear precipitously under show-ers of rain and the bruising winds off the North Atlantic.

Iceland is a land of extremes, suspended between Europe and North America, with ties to Scandinavia (Vikings, sagas, an affinity for nature) but few of its high-profile design icons. The countryside features dramatic textures (moss, magma, roiling hot springs, and glacial crevasses), while much of its tiny, cosmopolitan population lives in the highly rational architecture of the capital, Reykjavík. The national language, like much of Iceland’s architecture, is literal and lacks extraneous embellishment or preciousness. Additions to the lexicon are often made up of precise, elaborate compound words (Icelandic is not unlike German in this respect), augmenting the Icelandic vocabulary to keep pace with developments in technology and the sciences. (The word for “deodorant,” svitalyktareydir, entered the dictionary some decades back and literally means “smell-sweat-destroyer.”) But this highly efficient brand of economy is tempered by a widespread faith in fairies and huldufólk, the hidden people who inhabit stones.

It wasn’t until 2000 that the Iceland Academy of Arts began to grant degrees in design, and today, as the first graduates establish studios and show new work, Reykjavík’s burgeoning design community is reaching new heights. Last year Gunnlaugsdóttir curated the exhibit Magma/Kvika: Icelandic Contemporary Design 2007 at the Reykjavík Art Museum, which featured the multidisciplinary work of more than 80 local designers, a striking number relative to the country’s population of 300,000.

Over skewers of fresh fish brought home from a hole-in-the-wall shop in the nearby harbor, Gunnlaugsdóttir talked about what’s afoot and why it’s time for all of us to keep an eye on Iceland.